South Korea and All-Out Microchip World War

South Korean President Yoon Suk Yeol: “Competition between the semiconductor industries has become extremely exaggerated and fierce.” This topic will be discussed during Anthony Blinken’s visit to Beijing next week.

“The worldwide rivalry for dominance in the semiconductor industry has taken the form of extreme and fierce competition. South Korean companies are not able to stand up to such ruthless competition on their own,” said South Korean President Yoon Suk Yeol in an interview with the Yonhap news agency.

“Competition for semiconductors is a real industrial war. An all-out war that is going on at the level of the peoples of the world,” the President of South Korea emphasized. “The biggest risk for business is the problems of a geopolitical nature. Businesses alone are unable to solve these global problems that the state must instead face by strengthening cooperation and communication channels with the USA and with all other countries that are friends of Seoul.

In the past 20 years, South Korean manufacturers have played a leading role in the production of memory chips, but now they are facing foreign competition, as well as the negative effects of rivalry between China and the USA.” According to data published by the presidential administration in Seoul, “the products of the semiconductor industry account for 20% of South Korea’s exports.” In 2022, investment in sophisticated chip manufacturing equipment accounted for 55% of total investment in this country.

On October 7, 2022, the US Department of Commerce banned the sale to China of the most advanced and sophisticated microchips, hardware, components, and even the software used to manufacture them. A particularly tight control has been placed on everything related to artificial intelligence and the potential use of products “made in USA” for China’s defense industry.

The decision of the Netherlands and Japan to adhere to Washington’s sanctions policy has hit China’s microelectronics industry hard. And this is because the Dutch company ASML Holding NV and the Japanese company Tokyo Electron Ltd. considered to be of “strategic importance” for Washington to be able to fully implement its sanctions against Beijing.

On May 23, during negotiations with Dutch Foreign Minister Wopke Hoekstra, the head of Chinese diplomacy, Qin Gang, appealed to the Dutch government to allow the export of ASML Holding NV products to China. Qin Gang later told his Japanese colleague Yoshimasa Hayashi that “Tokyo should not support the US policy aimed at hindering China’s microchip manufacturing.”

To give more weight to its words, in May Beijing imposed restrictions on the import of chips manufactured by the US company Micron, banning Chinese companies from importing its semiconductors and chips, because, as stated in a special note from the Chinese Department of National Security in charge of information security, “Micron’s products have potential security problems, pose a serious threat to the security of China’s critical informational infrastructure, and threaten China’s national security.”

Beijing’s decision was sharply criticized by Washington. State Department spokesman Matthew Miller denounced “China’s inconsistency in proclamations of full trade openness that would be clear and respectful of rules.”

The hot topic of the “semiconductor war” is expected to be raised during the visit by US Secretary of State Anthony Blinken, who, according to some international sources, including Politico, will be able to go to Beijing as early as next week.